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11 – 20 of over 10000Md. Rezaul Karim, Samia Afrin Shetu and Sultana Razia
The pandemic COVID-19 has affected every sector of an economy in every possible way. Banking sector of Bangladesh has been affected by it badly. The purpose of this paper is to…
Abstract
Purpose
The pandemic COVID-19 has affected every sector of an economy in every possible way. Banking sector of Bangladesh has been affected by it badly. The purpose of this paper is to find out the impact of COVID-19 on the liquidity and financial health of the listed banks in Bangladesh.
Design/methodology/approach
Liquidity ratios are calculated to measure the liquidity condition of the banks and revised Altman's Z-Score Model for non-manufacturing companies is used to measure the financial health. The ratios are compared before and during the COVID-19 periods to assess the impact.
Findings
The findings of this study indicate a deterioration of liquidity position and financial health of the listed banks after the emergence of this pandemic. Though the banks have poor liquidity ratios and financial health prior to the emergence of this pandemic, they have decreased more in the second quarter of 2020. Most of the banks have poor liquidity ratios and cash position. The listed Islamic Banks have poor financial health than the listed Commercial Banks and all the banks belong to the red zone in all the quarters.
Practical implications
The results of this study will have policy implications for companies and regulators of money market.
Originality/value
This paper is a pioneer initiative in assessing the impact of COVID-19 pandemic on liquidity and financial health based on empirical data.
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Kekoura Sakouvogui and Saleem Shaik
The purpose of this paper is to evaluate the importance of financial liquidity and solvency on US commercial and domestic banks’ cost efficiency while accounting for internal and…
Abstract
Purpose
The purpose of this paper is to evaluate the importance of financial liquidity and solvency on US commercial and domestic banks’ cost efficiency while accounting for internal and external factors.
Design/methodology/approach
The Stochastic Frontier Analysis and Data Envelopment Analysis estimators are used to estimate the cost efficiency of 11,044 US commercial and domestic banks from 2005 to 2017. Using Tobit regression model, the importance of financial liquidity and solvency on cost efficiency is examined.
Findings
The results provide evidence that the financial liquidity and solvency negatively impact the cost efficiency of US commercial and domestic banks. Overall, US commercial and domestic banks were inefficient during the financial crisis in comparison to the tranquil period. The importance of financial solvency on the cost efficiency was not statistically significant, while the financial liquidity negatively collapsed because of contagion. Finally, the results provide evidence that the amount of total assets matters in the improvement of the cost efficiency.
Originality/value
This paper estimates and identifies the 2007-2009 financial crisis with liquidity, solvency or both financial factors.
– The purpose of this paper is to provide a cohesive review of the major findings in the literature concerning the Global Financial Crisis.
Abstract
Purpose
The purpose of this paper is to provide a cohesive review of the major findings in the literature concerning the Global Financial Crisis.
Design/methodology/approach
Papers published in top-rated finance and economics journal since the crisis up to the present were reviewed. A large number of these were selected for inclusion, primarily based on the number of citations they had received adjusted for the amount of time elapsed since their publication, but also partly based on how well they fit in with the narrative.
Findings
Much has been done to investigate the causes of the Global Financial Crisis, its effects on various aspects of the financial system, and the effectiveness of regulatory measures undertaken to restore the financial system. While more remains to be done, the existing body of research paints an interesting picture of what happened and why it happened, describes the interrelationships between the mortgage markets and financial markets created by the large scale securitization of financial assets, identifies the problems created by these inter-linkages and offers possible solutions, and assesses the effectiveness of the regulatory response to the crisis.
Originality/value
This study summarizes a vast amount of literature using a framework that allows the reader to quickly absorb a large amount of information as well as identify specific works that they may wish to examine more closely. By providing a picture of what has been done, it may also assist the reader in identifying areas that should be the subject of future research.
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Ameni Ghenimi, Hasna Chaibi and Mohamed Ali Brahim Omri
This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks.
Abstract
Purpose
This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks.
Design/methodology/approach
This study uses a dynamic panel data approach to examine the relationship between liquidity risk and a set of bank-specific and macroeconomic factors during 2005–2015, by selecting 27 Islamic banks and 49 conventional ones operating in the MENA region. More specifically, the dynamic two-step generalized method of moment estimator technique introduced by Arellano and Bond (1991) is applied.
Findings
The results suggest that the set of bank-specific variables influences the liquidity risk of both banking systems, while macroeconomic factors determine the liquidity risk of conventional banks. Islamic banks are not affected by macroeconomic determinants.
Practical implications
The research facilitates to the academicians, practitioners and bankers to have an alluded picture about liquidity risk determinants and their management. The findings can be used by bankers’ policy decision-makers to improve and enhance their consideration for liquidity risk management in both banking systems. Indeed, the study makes them aware to manage liquidity risk differently between conventional and Islamic banks, as the results reveal different liquidity risk determinants.
Originality/value
Compared to the abundant studies on the determinants of credit risk, researchers have not sufficiently addressed the factors influencing liquidity risk. Moreover, none of these few research studies has discussed and compared liquidity risk determinants within both banking systems operating in the Middle East and North Africa (MENA) region. This leads us to identify the similarities and differences between conventional and Islamic banks in the MENA region in respect of systematic and unsystematic determinants of the liquidity risk. The value is attributed to the increasing differentiation between Islamic and conventional banks. Islamic banks are characterized with a different liquidity structure distinguishing them from their conventional counterparts.
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The purpose of this paper is to examine the effect of Sharia-compliance (SC) on investment sensitivity to internal funds in oil rich countries.
Abstract
Purpose
The purpose of this paper is to examine the effect of Sharia-compliance (SC) on investment sensitivity to internal funds in oil rich countries.
Design/methodology/approach
A fixed-effect panel technique with OLS regression is used to investigate such relationship applying data from a sample of 207 non-financial firms listed on the Gulf Cooperation Council (GCC) stock markets over the period 2009–2014.
Findings
The results show that the investment-cash flow (ICF) sensitivity is positive, and is a lot larger for more constrained firms. Compared to developed markets, the results show higher ICF sensitivity in GCC countries. The evidence also shows that SC decreases the dependence of firms on internally generated funds when undertaking new investment projects. Unexpectedly, the results reveal that the ICF sensitivity increases when liquidity becomes abundant. Additional analysis suggests that investment expenditures of firms display a greater sensitivity to cash flow in the crisis period.
Practical implications
The implications of this study are that SC is a nature of business that reduces the propensity of corporations to undertake inefficient investments that are derived from capital market imperfections. However, manager ability to overinvest increases when liquidity is abundant suggesting that cash-rich firms are more likely to engage in value-decreasing projects.
Originality/value
The proposed study presents several originalities. First, it provides evidence on ICF sensitivity in specific emerging economies, namely the GCC countries. Second, it highlights the issue of efficient investment. For this purpose, the present paper focuses on Sharia-compliant (SC) firms where financial constraints are bound to be more stringent than for non-Sharia-compliant (NSC) firms. Finally, the study findings enable us to investigate what the sudden abundance of liquidity, generated by the record levels of oil prices, as well as the financial crisis implied for the ICF relationship.
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Fatima N. Ali Taher and Mohammad Al-Shboul
This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity.
Abstract
Purpose
This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity.
Design/methodology/approach
A multivariate panel-data regression analysis is conducted for a sample of the largest 411 nonfinancial US firms. Three main hypothesis are tested: (1) whether dividend payouts impact affect stock liquidity, (2) whether low and high dividend payments can asymmetrically effect on stock liquidity and (3) whether the presence of the GFC has an impact the relationship between dividend payments and stock liquidity.
Findings
The study finds that dividend policy is adversely associated with stock liquidity. This supports the prediction of the liquidity-dividend hypothesis. The authors also report that stock liquidity asymmetrically responds to changes in dividend payouts, confirming the prediction of the dividend-signaling approach. More specifically, higher dividend payments decrease stock liquidity by a lower magnitude than the increase in stock liquidity resulting from lower dividend payments. Finally, the presence of the GFC weakened the relationship between dividend payments and stock liquidity.
Research limitations/implications
The paper can help in performing future research by using different dataset covering the COVID-19 crisis.
Practical implications
The paper allows market participants to better understand the impact of dividend policy and its asymmetric effects on stock liquidity. The authors’ analyses can direct investors and regulators to adopt new supervisory devices to create an appropriate level of dividend payouts that helps to effectively support the level of stock liquidity.
Social implications
The paper intends to support the business community and to make strong contributions to the economic development and the welfare of the community.
Originality/value
The originality comes from its new evidence as it can help in assessing the importance of dividend policy and its asymmetric impact on stock liquidity in the full sample and during the GFC. The paper is helpful in performing future analyses using a new sample period for another set of data as well as accounting for COVID-19 pandemic crisis.
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Abdelaziz Chazi, Ali Mirzaei and Zaher Zantout
Proponents of Islamic banking believe that this banking model is relatively superior in times of financial crises. This study aims to examine whether Islamic banks were more…
Abstract
Purpose
Proponents of Islamic banking believe that this banking model is relatively superior in times of financial crises. This study aims to examine whether Islamic banks were more resilient to the coronavirus 2019 (COVID-19) pandemic than their conventional peers, especially in terms of two of the most important banking risks, capital and liquidity risks.
Design/methodology/approach
The authors use a regression model to examine whether Islamic banks were more resilient to the recent health crisis, as compared to their conventional counterparts. The results are robust to alternative crisis time periods, the use of different model specifications and the inclusion of different control variables.
Findings
Unlike during the 2007–2008 global financial crisis (GFC), Islamic banks have not performed relatively well during the more recent crisis caused by the COVID-19 pandemic. The results show that Islamic banks experienced an increase in both capital and liquidity risks. The results also indicate a decrease in bank profitability, improved solvency and asset quality and a decrease in operational risk.
Originality/value
This study contributes to the literature on banking business model and resilience to economic crises. Contrary to some expectations and to their performance during the GFC of 2007–2008, Islamic banks were found to be more vulnerable during the COVID-19 pandemic than conventional banks.
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Mahdi Bastan, Reza Tavakkoli-Moghaddam and Ali Bozorgi-Amiri
Commercial banks face several risks, including credit, liquidity, operational and disruptive risks. In addition to these risks that are challenging for banks to control and…
Abstract
Purpose
Commercial banks face several risks, including credit, liquidity, operational and disruptive risks. In addition to these risks that are challenging for banks to control and manage, crises and disasters can exert substantially more destructive shocks. These shocks can exacerbate internal risks and cause severe damage to the bank's performance, leading banks to bankruptcy and closure. This study aims to facilitate achieving resilient banking policies through a model-based assessment of business continuity management (BCM) policies.
Design/methodology/approach
By applying a system dynamics (SD) methodology, a systemic model that includes a causal structure of the banking business is presented. To build a simulation model, data are collected from a commercial bank in Iran. By presenting the simulation model of the bank's business, the consequences of some given crises on the bank's performance are tested, and the effectiveness of risk and crisis management policies is evaluated. Vensim Personal Learning Edition (PLE) software is used to construct the simulation model.
Findings
Results indicate that the current BCM policies do not show appropriate resilience in the face of various crises. Commercial banks cannot create sustainable value for the banks' shareholders despite the possibility of profitability, as the shareholders lack adequate resilience and soundness. These commercial banks do not have the appropriate resilience for the next pandemic after coronavirus disease 2019 (COVID-19). Moreover, the robustness of the current banking business model is very fragile for the banking run crisis.
Practical implications
A forward-looking view of resilient banking can be obtained by combining liquidity coverage, stable funding, capital adequacy and insights from stress tests. Resilient banking requires a balanced combination of robustness, soundness and profitability.
Originality/value
The present study is a combination of bank business management, risk and resilience management and SD simulation. This approach can analyze and simulate the dynamics of bank resilience. Additionally, present of a decision support system (DSS) to analyze and simulate the outcomes of different crisis management policies and solutions is an innovative approach to developing effective and resilient banking policies.
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M. Imtiaz Mazumder and Nazneen Ahmad
The purpose of this paper is to shed light on the causes of the 2007‐2009 mortgage crisis, liquidity crisis, stock market volatility in the USA and their spillover effects on the…
Abstract
Purpose
The purpose of this paper is to shed light on the causes of the 2007‐2009 mortgage crisis, liquidity crisis, stock market volatility in the USA and their spillover effects on the global economy.
Design/methodology/approach
The paper critically reviews the 2007‐2009 financial crisis from both academic and practitioners' viewpoints.
Findings
The paper explores how the liquidity crisis has evolved with the advent of poorly supervised financial products, especially the credit default swaps and subprime mortgage loans. Further, it analyzes the laxity in regulations that encouraged high financial leverages, shadow banking system and excessive stock market volatility and worsened the recent financial crisis.
Originality/value
The implication of this paper is to understand numerous policy reforms that will help the global capital markets to be more transparent and less vulnerable to systematic risks; the suggested policy reforms may also help to prevent such financial calamities in the future.
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